Greencoat Capital's Richard Nourse on Brexit, growth and more

On 7th March, we hosted our first Quarterly Drinks evening of 2018 at The Shard in London, and heard interesting views on the market in our interview with Richard Nourse, managing partner at UK infrastructure investor Greencoat Capital.

Nourse calls himself a ‘recovering banker’ after working for two decades at Morgan Grenfell and Merrill Lynch. He then set up Greencoat Capital in 2009. The firm now has at least £2bn of assets under management in wind, solar and private equity; and this gives Nourse a great view on investment trends in wind.

Here are five of his key points:

1) Greencoat is focused on expanding in Ireland…

The firm’s flagship fund is Greencoat UK Wind, which invests in operating onshore wind farms in the UK and now has a portfolio of £1.25bn. Last week, it paid £163m for the 47.5MW Brockaghboy wind farm in Northern Ireland from ERG.

Its other vehicles are its £550m UK solar fund; and Greencoat Renewables, which it set up in early 2017 to invest in operating wind farms in the Republic of Ireland. This fund owns two wind farms totalling 137MW, but Nourse said he wanted Greencoat Renewables to reach the same size as its UK wind vehicle.

“We’ve moved from £260m in the UK in wind [raised at Greencoat UK wind’s initial public offering in 2013] to £1.5bn, and we want to do the same in Ireland,”he said.

2) …and is planning to grow outside the UK and Ireland.

Nourse also said Greencoat was looking to launch funds in other countries, including potentially the US and India. This could enable it to attract new types of investors.

He said:“Every year or so, we’ve found something different to do, and what we want to do is back management teams who come to us. We can go and talk to our investors that we’ve talked to, who’ve told us they didn’t like our current products, and say: ‘Would you be interested in this riskier product? This different product?’… I hope we might do dollars or rupees or something like that next, but truthfully we don’t know.”

3) He expects the UK to increase backing for onshore wind…

Nourse is also a non-executive director at nuclear group Urenco and sat on a panel that advised Dieter Helm on a UK government review into energy costs.

Nourse said he thinks there are ministers in the Department of Business, Energy & Industrial Strategy that want new auctions for established ‘pot one’ renewables technologies, including wind, and wanted to see if the Helm review could help make the case.

“When it’s so obvious [that established technologies offer LCOEs of] £20-£30/MWh, and you’re basically inflicting higher prices on the British energy customer, that’s an interesting position. I feel that will become unlocked in the next year,”he said.

Nourse said ministers might also be waiting to see if a pot one auction is needed, or if developers will find other ways to get financial certainty for their new projects – for example, power purchase agreements or other hedging mechanisms.

4) …but Brexit is delaying longer-term system planning.

Nourse was confident that the UK would continue to de-carbonise its energy system after leaving the European Union, because its plans are set by the Carbon Change Act rather than EU law. But he added that Brexit was delaying longer-term system plans.

He said: “I’m absolutely clear that they are starting to think about what the energy needs to look like if we move to 75% renewables, or we move towards 45% renewables and 40% nuclear… I fear that the thinking is not happening as fast as it should do.”

5) He isn’t attracted to investing in storage yet.

Finally, Nourse said he couldn’t yet see the case for Greencoat investing in storage as it is complex to explain to investors and doesn’t have a clear income stream.

“I’d love to have somebody come up and say: ‘You’re so ignorant and prejudiced… we can do this for you.’ If they did I’d say: ‘Brilliant, let’s go and find some investors. But I think it’s not yet infrastructure. The cashflows don’t feel infrastructure-like.”

You can hear more from experts like Richard Nourse at our conferences and other Quarterly Drinks evenings in London and New York.